question
GDP
answer
The value of all new production in a nation or region in a given period of time
question
Actual GDP (Y)
answer
actual amount of production
question
Potential GDP (Y^F)
answer
Highest amount of production an economy can sustain and achieve
question
Recession
answer
GDP decreases for two or more consecutive quarters
question
Depression
answer
Deep, Prolonged decline of GDP
question
Unemployment
answer
Percent of workforce without a job
question
Frictional Unemployment
answer
enough jobs, job hunt takes time
question
Structural Unemployment
answer
enough jobs, mismatch of skills
question
Demand-Deficient Unemployment and what it represents
answer
Not enough jobs, represents unstable economy
question
Natural Rate of Unemployment (Definition)
answer
Expected unemployment found in growing economies
question
Price Level (P)
answer
Aggregate measure of prices in the economy
question
Inflation
answer
The price level rises
question
What does inflation do?
answer
Purchasing power of money falls
question
Deflation
answer
The price level falls
question
What does deflation?
answer
Purchasing power of money rises
question
Nominal Value
answer
A value measured in current dollar
question
Real Value
answer
value measured in constant dollars overtime
question
Nominal GDP calculates GDP by dividing each year by
answer
The same value, account for changes overtime
question
Consumer Price Index (CPI)
answer
measures price changes of goods the typical household buys
question
Formula for price index
answer
(Current basket price/ base basket price)x100
question
Aggregate Demand (AD)
answer
Represents the demand side of the economy and shows the relationship between P and Y demanded
question
Aggregate Supply (AS)
answer
Represents the supply side of the economy and shows the relationship between P and Y supplied
question
Aggregate Expenditure (AE)
answer
Total Planned spending by 4 sectors: Households, Firms, Government and Foreign
question
Real GDP demanded Equation
answer
Y=AD(P| AE)
question
Holding P constant, Aggregate Demand(AD) shifts when the level of ____ changes
answer
Aggregate Expenditure
question
AD shifts ____ (_____) when AE rises
answer
Right (Increases)
question
AD shifts ______(_______) when AE falls
answer
Left (Decreases)
question
What is the formula is of AE?
answer
AE=C+I+G-T+X-M
question
Consumption (C)
answer
Total expenditures by households on goods and services
question
Investment (I)
answer
Total expenditures by businesses on physical capital and new inventories. Also, includes spending on residential construction.
question
Government Spending (G)
answer
Total government expenditures.
question
Exports (X)
answer
Total expenditures by foreign sector on domestic production
question
Imports (M)
answer
Total Expenditures on production of other nations
question
An increase in what causes AE to increase and AD to rise?
answer
C,I,G,X
question
An increase in what causes AE to decrease and AD to fall?
answer
T, M
question
Net Government Budget Position
answer
The combined effect of G and T
question
A budget deficit is caused by_____.
answer
G>T
question
A balanced budget is caused by ______.`
answer
T=G
question
A Budget Surplus is caused by_____.
answer
G<T
question
Larger deficits stimulate the economy by _______.
answer
Increase Aggregate Demand
question
Net Exports (NX) are the combined effect of ______
answer
Imports and Exports
question
A trade deficit is demand caused by ______.
answer
X<M
question
A trade balance is caused by ______.
answer
X=M
question
A trade surplus is caused by ________.
answer
X>M
question
Aggregate Supply (AS)
answer
Relationship between Price Level (P) and the real GDP (Y) produced in an economy
question
Long Run Aggregate Supply
answer
Vertical line at Y^F
question
Three conditions of LAS
answer
1. Y is independent of P
2. Resource base is fully utilized
3. LAS shifts if resource base changes (long-long run)
2. Resource base is fully utilized
3. LAS shifts if resource base changes (long-long run)
question
Shape of AS reflects changes in costs of producing as Y _____ (3 segments)
answer
Increases
question
Holding basic factor prices constant is necessary to find _______.
answer
Short-run aggregate supply (AS)
question
What are the basic factor prices in the economy?
answer
Wages and the price of oil
question
What does a decrease in AD cause?
answer
A decrease in AD causes Y to decrease, unemployment to rise and deflation.
question
What does a decrease in AS cause?
answer
A decrease in AS causes Y to decrease, unemployment to rise and inflation.
question
What determines consumption?
answer
Real GDP (real income), Wealth and Consumer Confidence
question
Real GDP/ Real Income (Y) cannot shift AD because _____.
answer
Real GDP (Y) is already on axis
question
Autonomous Consumption
answer
Factors other than Y
question
Investment consists of _______.
answer
physical capital (plants and equipment) and newly-constructed housing
question
What is the market for borrowing funds from Investment (I)
answer
Long term Financial Capital Market
question
Shifts in S or DvI in the macro model cause______.
answer
AD shifts and Y, unemployment, and P change
question
Determinants of Supply of Capital (S) in LTCM are _______.
answer
Interest Rate (r)
question
Changes in r causes moves along _____.
answer
Supply of Capital (S)
question
Causes for Shifts In Supply of Capital (S) are ________.
answer
Lenders want to charge more/less r at a given level of capital lent
Entry/ Exit of funds
Entry/ Exit of funds
question
The higher the risk, the higher the _________, the higher the r
answer
Supply of Capital (S)
question
Premiums
answer
Added compensation
question
Entry or exit of funds cause ______.
answer
more or less capital at any interest rate.
question
Funds enter causing S to _____.
answer
Increase
question
Funds exit causing S to ____.
answer
Decrease
question
Business Confidence
answer
The amount of optimism/pessimism felt by firms in the economy
question
What 4 Factors affect Net Exportds
answer
World income, domestic income, trade barriers, Currency Exchange Rate (e)
question
Exchange rate is determined in equilibrium when exchange rate is ________.
answer
Allowed to adjust freely
question
When exchanging euros for dollars Sv(euros) shifts right and Dv(dollars) shifts right, the dollar _____ against the euro
answer
Appreciates
question
When exchanging euros for dollars Sv(euros) shifts right and Dv(dollars) shifts right, the euro _____ against the dollar
answer
Depreciates
question
When exchanging currency and the supply and demand shift right, the currency being supplied ______ while the currency being demanded _____
answer
Depreciates, Appreciates
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
